Wholesale Price Index WPI

The Wholesale Price Index (WPI) is a price index that measures the average change in prices of goods at the wholesale or producer level in India. It tracks price changes before goods reach retail consumers, making it useful as a leading indicator of consumer inflation.

What Is WPI?

WPI measures price changes at the point of first commercial transaction, typically the price paid between businesses (producer to wholesaler). It is published monthly by the Office of the Economic Adviser in the Ministry of Commerce and Industry.

The current base year for WPI is 2011-12.

WPI Basket and Weights

WPI covers three major groups:

| Category | Weight |
|———|——–|
| Primary articles (food, non-food, minerals) | 22.6% |
| Fuel and power | 13.2% |
| Manufactured products | 64.2% |

Manufactured products dominate WPI, reflecting industry’s importance.

WPI vs CPI

| Feature | WPI | CPI |
|———|—–|—–|
| Measures | Wholesale/producer prices | Consumer retail prices |
| Includes services | No | Yes |
| Used by RBI for | Reference | Inflation targeting (primary) |
| Base year | 2011-12 | 2012 |
| Frequency | Monthly | Monthly |

RBI uses CPI (Consumer Price Index) as its primary inflation target (4%), but WPI remains an important complementary measure.

WPI and Input Cost Inflation

Rising WPI signals higher input costs for businesses. If WPI inflation is high, businesses eventually pass costs on to consumers, leading to higher CPI. WPI is therefore a leading indicator of consumer price inflation.

Recent WPI Trends

WPI hit multi-decade highs of 15%+ in mid-2022 due to commodity price spikes (crude oil, metals). It then fell sharply in 2023 as commodity prices normalised, even turning negative (deflation at the wholesale level) while CPI remained above 4%.

Key Takeaways

– WPI measures price changes at the wholesale or producer level; covers goods, not services
– Dominated by manufactured products (64.2%) in its basket
– RBI targets CPI inflation (not WPI), but WPI is a useful leading indicator of CPI trends
– WPI can diverge significantly from CPI: in 2023, WPI turned negative while CPI remained elevated due to food prices
– High WPI inflation typically signals upcoming CPI pressure as producers pass on higher input costs